H&R Real Estate Investment Trust T.HR.UN

Alternate Symbol(s): HRUFF

Real Estate REIT - Diversified

H&R Real Estate Investment Trust is a Canada-based real estate investment trust. The Company owns, operates and develops residential and commercial properties across Canada and in the United States. The Company operates through the four segments: Residential, Industrial, Office and Retail. The Residential segment consists of approximately 24 residential properties in select markets in the United States and portfolio comprised of 8,166 residential rental units. The Industrial segment consists of 69 industrial properties in Canada and three properties in the United States comprising 8.7 million square feet. The Office segment consists of 18 properties in Canada and five properties in select markets in the United States, aggregating 5.8 million square feet. The Retail segment consists of 38 properties in Canada, which are grocery-anchored and single-tenant properties, as well as five automotive-tenanted retail properties and one multi-tenant retail property in the United States.

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H&R Real Estate Investment Trust > comments from Scotia

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Comment by Shirtlessnomoreon Aug 04, 2021 11:04am

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Post# 33648126

RE:RE:comments from Scotia

Having said that I dont see alot of positive catalysts right now just about everywhere a recovery play is concerned unfortunately. But I assumed late summer would not be pretty.

Shirtlessnomore wrote: For once I agree with a banks comments. I'd too call it a slight positive although the market disagrees apparently. Lol. Cheers!
incomedreamer11 wrote: Sale of The Bow and Bell Campus Kicks Off Strategic Initiatives

OUR TAKE: Slight Positive.

Lots of moving parts, but H&R announced the effective sale of an 85% interest in The Bow and 100% interest in its 1.1Msf Bell Office Campus in Mississauga, ON, for combined gross/net proceeds of $1.47B/~$0.8B.

H&R noted combined value exceeds Q1/21 IFRS value by $206M (~$0.70/un); we est. $63M of the $206M relates to est. NPV of future mgmt fees on both assets (i.e., $0.21). The implied ~$1.17B for The Bow (at 100%) is a bit below the $1.2B in our $18 NAVPU (at ~8% implied cap). We don't value the Bell Campus separately but we include "Other CAD Office" at combined 5.5% NAV cap (vs. implied ~7% on the sale). Net-net, our initial read is: sales price is fairly consistent with our in-place NAVPU, with some upside on new mgmt fees (not in our NAVPU).

Equally important, H&R noted net proceeds are expected to pay down debt (no mention of SIB at this stage or discussion of potential spin-out of Primaris ). We est. solely repaying debt = ~ $0.10-$0.15 of annual FFOPU dilution not in our model (incl. est. ~$0.02 of new fee).

Our Target Price is +6% (+$1.00) to $18.00 on a 2.5x increase in target multiple to 15.0x due to lower leverage, lower exposure to Alberta and lower key tenant concentration risk. Our Current NAVPU is +$0.50 to $18.50; $0.25 due to a 50bp decline in Industrial cap rate to 4.5%, with the other $0.25 on $75M of value attributable to a new $5M/year fee stream coming from property management fees (HR est. 100% margin); we use 15.0x.

We assume the deals close by year-end, resulting in a $0.19 and $0.15 decline in our 2022E FFOPU and AFFOPU (-11% vs. 2020A).

We think HR can revisit Q1/21A FFOPU by 2H/22. Net-net, we still see some upside in H&R as it still trades at a discount but a 125% recovery from COVID-trough has yielded a more reasonable valuation (vs. 90% for sector), in our view, particularly if $0.8B of net proceeds remain confined to debt repayment (our base case = no SIB pending corporate restructuring later this year).